Kuwait Oil Tanker Company SAK and others (Respondents) v. UBS AG (Appellants)

A third-party debt order is enforcement against the debt itself, rather than an personal claim against the third party. Under article 16(5) of the Lugano Convention, the courts of the contracting state in which that debt is situated therefore have exclusive jurisdiction over its attachment.

An English court must decline jurisdiction where the debt is situated in another contracting state. Independently of the Convention, an order should not be made against a foreign debt when compliance would not discharge the third party under the law governing the debt and would expose it to a real risk of paying twice.

The judgment creditors had obtained judgment for more than US$130 million against a person who had defrauded them. Suspecting that he retained funds in a Swiss account with UBS AG, they sought a garnishee order from the English court and served it on UBS's London branch.

Langley J discharged the order. Although he considered that the Lugano Convention did not remove jurisdiction, he found a real risk that UBS would remain liable in Switzerland. The Court of Appeal, in [2002] EWCA Civ 34, held that enforcement occurred in England and remitted the double-liability question.

The central issues were whether attachment of a Swiss debt amounted to enforcement in Switzerland for article 16(5), and whether an English order could safely be made when it would not discharge the foreign debt.

1. Appeal allowed unanimously. Lord Hoffmann held that a garnishee or third-party debt order is enforcement in rem against the debt. It is not properly characterised as an action in personam against a third party served in England. The relevant debt, if it existed, was situated in Switzerland.

2. Lord Bingham and Lord Hoffmann held that article 16(5) of the Lugano Convention conferred exclusive jurisdiction on the Swiss courts because Switzerland was the contracting state in which enforcement against the debt would occur. Article 19 accordingly required the English court to decline jurisdiction. Lord Millett emphasised that these jurisdictional limits were imposed by the Convention and section 3A of the Civil Jurisdiction and Judgments Act 1982, rather than resting merely on judicial self-restraint. Lord Nicholls, Lord Hobhouse and Lord Millett agreed with the reasons given by Lord Bingham and Lord Hoffmann.

   The place of enforcement was determined by the location of the property against which execution was sought. The Convention jurisprudence supported concentrating enforcement jurisdiction in the state where the relevant property was located and whose authorities and enforcement law would be engaged.

3. Lord Hoffmann further held that the order should not have been made even apart from article 16(5). The Swiss debts were foreign debts. Compliance with an English order would not discharge them under the applicable law, notwithstanding the domestic discharge provided by RSC, Ord 49, r 8. UBS would therefore remain exposed to a claim by the judgment debtor and to the risk of paying twice.

   The Court of Appeal's conclusions on both jurisdiction and possible restitutionary protection were incompatible with the House's decision in Société Eram Shipping Co Ltd v Hong Kong and Shanghai Banking Corporation Ltd [2003] UKHL 30. The order of Langley J discharging the garnishee order was restored.

1. House of Lords: Allowed UBS's appeal unanimously and restored Langley J's order discharging the garnishee order.
2. Court of Appeal: In [2002] EWCA Civ 34, held that enforcement occurred in England for article 16(5) and remitted the question whether Swiss law would recognise a restitutionary claim protecting UBS from double liability.
3. High Court: Langley J considered that the Lugano Convention did not remove jurisdiction, but discharged the garnishee order because Swiss law presented a real risk of proceedings, sanctions and double liability.